Fannie Mae

Fannie Mae reports record $17.2 billion in profits

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By Ruth Mantell

WASHINGTON (MarketWatch) -- Federally-backed mortgage buyer Fannie Mae reported record profits Tuesday morning, recording its first annual net income since 2006, led by better credit results and revenue. For 2012, Fannie Mae FNMA +16.35% reported net income of $17.2 billion, compared with a loss of $16.9 billion in the prior year. Meanwhile, net revenues rose to $23 billion in 2012 from $20.4 billion in 2011. Looking forward, company officials said they expect "strong" annual net income in the next few years on improving credit quality and higher guaranty fees. Fannie said it was not releasing its valuation allowance, which was $58.9 billion at the end of last year, on deferred tax assets.

WASHINGTON — Taxpayer-owned Fannie Mae and Freddie Mac are back in the black, but it's unlikely to keep the nation's housing finance giants from being dismantled.

Boosted by the recovery in the housing market, Fannie Mae on Tuesday reported a record annual profit of $17.2 billion for last year, a sharp turnaround from a $16.9-billion loss in 2011. In February, Freddie Mac reported net income of $11 billion, compared with a loss of $5.3 billion the previous year.

Their first annual profits in six years also have helped the companies reduce the balance of the combined $187.5 billion they received in a government rescue in 2008 when they hovered near bankruptcy amid the crash in the subprime housing market.

Their hefty profits could delay already slow-moving efforts by Congress to replace the companies because the bailout tab has stopped rising and policymakers are hesitant to do anything to imperil the improving real estate market.

Fannie and Freddie, along with the Federal Housing Administration, back about 90% of new mortgages.

WASHINGTON — Mortgage giant Freddie Mac earned $4.6 billion from January through March, helped by a stronger housing market. The government-controlled company has turned a profit in the past six quarters.

Freddie said Wednesday that it will pay a dividend of $7 billion to the U.S. Treasury next month and requested no additional federal aid for the fourth consecutive quarter.

The earnings compared with net income of $577 million in the first quarter of 2012.

The government rescued Freddie and larger sibling Fannie Mae during the financial crisis after both incurred massive losses on risky mortgages. The companies received loans about $170 billion, the costliest bailout of the crisis. So far, the companies have repaid a combined $62.2 billion.

By MarketWatch
Freddie Mac's FMCC +1.43% second-quarter profit jumped 65% as the improving housing market continued to boost the mortgage-finance company's credit quality, while Freddie also benefited from large derivative gains.

The quarterly profit was Freddie's seventh consecutive, and its second-largest ever.

The fortunes of Freddie and sister company Fannie Mae FNMA +1.99% , which have been operating under government control since 2008, have risen in recent months as home prices have rebounded and borrower delinquencies have fallen, allowing them to set aside less money to cover future losses.

But with the housing market finally on the mend, President Barack Obama outlined his vision on Tuesday for scaling back federal support of the nation's mortgage market, part of an opening bid to help build support for bipartisan Senate talks to replace mortgage giants Freddie Mac and Fannie Mae.

Nearly five years they were seized by the U.S. government, Mr. Obama called for ending the business model of Fannie and Freddie. But in their place, Mr. Obama made clear he would only support a system that provided continued access to long-term, fixed-rate mortgages. Those loans remain unique in the U.S. and likely require some form of a federal backstop if they are to remain widely available.